The books have closed on what has been the worst year in history for aviation, and nobody is expecting the US big four to come out smelling of roses. But how bad has it been, and was the festive bump enough to give the airlines a healthy end to the year? With Q4 2020 results announcements looming, we take a look at what to expect.
Let’s begin at the beginning, with the low cost airline that started a trend. Southwest Airlines has been reporting huge losses across the year, notching up a $1.2 billion loss in the third quarter of 2020. But from December 1st, the airline stopped blocking middle seats, having assessed that this had cost it up to $100m across the year. But did allowing it to sell 33% more tickets on flights make for a better finish to the year?
Back in December, Southwest raised its expectations for average daily cash burn over the quarter, as the US experienced new outbreaks of COVID and the recovery trajectory stalled. A stock market filing showed it expected a daily cash burn of around $12 million, up from $10 – $11m that was projected in its previous results.
Nevertheless, the airline has been adding new routes and destinations to its network, targeting direct point-to-point services for leisure traffic. However, some of these routes won’t come online until this quarter, and those that did likely experienced weak load factors as passengers chose to stay home instead.
Marketbeat analysis, derived from Zacks Investment Research, projects sales will be reported in the region of $2.13 billion for the quarter, and around $9.16 billion for the year as a whole. That will make for a 62.8% contraction over performance in 2019. Nasdaq is predicting an earnings per share result of -$1.63, indicating another significant loss. Southwest is expected to return its results on January 28th.
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On to the world’s biggest airline by fleet and passengers, and the outlook for American Airlines isn’t much better. The carrier faced a $2.1 billion loss in Q2 2020, and a deeper $2.4 billion loss in Q3. It predicted a daily cash burn of between $25 – $30 million per day, and in December said that it was expecting the results to be at the top end of that forecast.
However, the company has been working hard to streamline its operations. Retirement of the Airbus A330s left it with only four aircraft types in its fleet, and permanent changes have been made to its crew, maintenance and schedule efficiencies.
Zacks Investment Research predicts sales of around $4.12 billion in the fourth quarter to be announced by the airline. That puts it in the same ballpark of contraction as Southwest, at 63.6% year over year. Earnings per share are predicted to be -$4.11, with the next report due on January 28th also.
Delta Air Lines
2019s biggest airline by revenue and asset value, Delta Air Lines, registered a $6.9 billion pre-tax loss in the third quarter of 2020. That was almost double the loss for the second quarter. Since then, the airline has been in major cost-cutting mode, with some 18,000 workers accepting buyouts or early retirement packages.
Delta, too, revised its daily cash burn estimates late in December, projecting a $2 million a day increase from its $10 – $12 million estimate, taking it to around $14 million daily. Confidence in the airline was further shaken with Warren Buffet’s massive share sale in April, where 13 million Delta shares were offloaded for around $314 million.
Zacks estimates are for a revenue report of around $3.67 billion, down 67.9% year on year. The earnings per share forecast on Nasdaq are for -$2.36, with no return to positive until 2022. The airline will release its Q4 results on or around January 14th.
Following the trend of its competitors, United Airlines similarly notified the market of a projected increase in its cash burn during December. Its net loss in the third quarter had been $1.8 billion, but it had estimated cash burn to be down to $15 – $20 million a day. Its December filing indicated it now expected daily cash burn to rise to some $25 million.
While there was high hope December would be a good month for United, the airline noted that it was experiencing “continued deceleration in forward bookings as a result of the spike in COVID-19 cases and travel restrictions.” It projected revenue to be down as much as 70% as a result.
Nasdaq is projecting an earnings per share result as poor as -$6.27, the worst of the four big US carriers. Analysis is forecasting a fourth quarter revenue result of $3.6 billion, down 66.9% from 2019’s $10.9 billion revenue. United will report its results around January 21st.